Fitch Puts Max Re on ‘Rating Watch’

October 31, 2006

Fitch Ratings announced that it has placed the “A” insurer financial strength ratings of Max Re Ltd. and its Dublin-based subsidiaries, Max Re Europe Limited and Max Insurance Europe Limited on Rating Watch Negative. Fitch also placed the “A-” Issuer Default Rating (IDR) of Max Re Capital Ltd., the Bermuda-based holding company of Max Re Ltd, on Rating Watch Negative.

Fitch said the action “reflects increased uncertainty following the company’s announcement yesterday that it will delay the reporting of its third quarter 2006 results due to its decision to restate its financial statements for the years 2001 to 2005 and the first six months of 2006 [See related article].”

Fitch said, however that its “ratings on Max Re continue to reflect the company’s disciplined and flexible approach to underwriting risks, through the continued use of its sophisticated models and structuring of every contract with loss caps and aggregate limits, improved operating results posted thus far in 2006 and favorable parent company financial flexibility.”

The rating agency indicated that it “expects to resolve the Rating Watch within the next three to six months. This will follow an assessment of any adverse impact on the company’s franchise, reputation, competitive or financial position as a result of the company’s further restatement. In addition, there continues to be uncertainty related to how the Securities and Exchange Commission (SEC) will respond to the information provided by the company in relation to its restatements. Resolution of the Rating Watch will also depend upon Fitch’s evaluation of Mr. Becker and the management team’s ability to continue to successfully execute the company’s business strategy going forward.”

Fitch gave details or Max Re’s revelations concerning the finite reinsurance transactions, and said that while it “views the financial statement effect of the restatements as minor relative to the company’s $1.4 billion of shareholders’ equity at June 30, 2006, it highlights the increased level of scrutiny surrounding the use of finite reinsurance.”

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